Ted Speaks

It stands to reason that it was a faulty algo, however it's not out of the question that this was a dump and pump either. After the recovery Knight had in off hours last night, some people made a LOT of money.

I completely agree with you that there is no way to judge risk anymore. Bonds are supposed to fill that role, but when interest rates are held down instead of being allowed to move according to risk, and when Lie-bor rates are skewed for profit, there is no longer any risk identification mechanism in today's markets. It doesn't take much to do your own though. Just look at the national debt.

 

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Good for you. However if you can't explain HOW you do it, then it's anecdotal at best. Pointing people to a book really isn't an answer either. If Mr Graham's advice had pointed you to one of the 140 stocks that Knight capital gamed during their downfall, you may have come to the wrong conclusions and bailed or bought at the wrong time. While I have not read his book, I would be surprised if he takes the investor into the realm of computer algorithms that trade a stock 1000s of times/minute.

 

I disagree.

 

I can explain how, and I've taught two people who are now successfully managing their own stock portfolios. But that isn't the purpose of this forum, so I limited myself to recommending where people can go to get on the right track. I haven't even looked at what Knight owned. Maybe I own one or more of them. What happens in a single day is inconsequential to investment results over a multiyear period. What the book would show you is that computer algorithms are irrelevant to value investing. But I understand that since you never studied the topic, and have bought into the idea that investing is beyond the ability of individuals, then you have to believe what you do, and defend your inability to do it.

Edit: I checked the impact of Knight on a few large cap stocks like AT&T, Wells Fargo and Alcoa [none are recommendations], and as suspected the excitement lasted only one day. It might have been a good buying opportunity for people inclined to watch the market full time, but it was basically a non-event for value investors.

 

The $10 bottom in silver in 2008 coincides with the QE1 announcement that November. I don't know what you are specifically disagreeing with, but at most there is only a couple weeks of wiggleroom for this correlation. Facts are facts whether or not we agree with them. It is correct that QE2 is not as close of a correlation, but as I said that's because they showed their hand in advance so the rise began early.

It's funny how even though this is a coin forum everybody is against silver as a monetary metal. We've got the stock bugs, the bond bugs, the currency bugs, the farmland bugs, and even you fatima, the gold bug, all naysaying silver, or pretending to like it only to promote something else as being better. Somehow 40 years of the largest ponzi scheme in the history of the world goes by and we throw out truths evident throughout human history. It is not a matter of if but when gold will return to money, and it is not a matter of if but how closely silver will follow.

 

This alone means your investment theory fails. Anytime you are force do to post results backtracking then your plan can't be relied on. While it may have created a good buying opportunity, this is well beyond the type of investing that individuals in the bullion market will be looking at. The fact that trading volume has disappeared is a very good indication that many many people have exited the market. Confidence is being destroyed and the ones left behind take bigger and bigger risk because of it.

My advice: Never ever take investment advice from someone who is going to profit from selling you said advice. This applies to people selling books.

 

Actually it means that your theory that individuals can't invest well in this market is false. The events you described cause no risk and no decrease in investment returns to someone following basic value investing techniques. It is living recent proof that what I said is true and sound.

I agree with you that most people can not and should not try to trade such events, which are really non events if your intended holding period is more than 24 hours. But the potential is there if someone happens to be watching the market at that particular time. I agree trading volume has decreased. And I agree that confidence in the system is lower than the past. But none of this is of any concern to the traditional value investor, and may even benefit the technique since so few are using it.